Physics academic Neil Johnson has characterized complexity science as the study of phenomena which emerge from a collection of interacting objects. Related to the concept of complexity and complex systems is the notion of the edge of chaos at which a system may emerge into something complex. This uncited excerpt from Wikipedia sums up the concept well:

In the sciences in general, the phrase [the edge of chaos] has come to refer to a metaphor that some physical, biological, economic and social systems operate in a region between order and either complete randomness or chaos, where the complexity is maximal.

Chaos is simple: the conditions within the system are unpredictable and random, but no greater system emerges. Complete stability is also simple in that there is order but no greater system emerges. Complexity occurs exactly on that threshold between chaos and stability: that is where a system emerges whose behavior is greater than the sum of its parts.

A flock of birds is often cited as a very classic and straightforward example of a complex system (a “simple” complex system, if you will), because the flock appears to behave like its own organism. Those who study flocks (flockers?) have succeeded in making computer models that perfectly mimic real-life flock behavior by programming three rules into the agents:

1. Separation – avoid collision with neighbors (short range repulsion)

2. Alignment – flow in the same general direction as neighbors

3. Cohesion – stay with the flock to make yourself a harder target for predators (long range attraction)

Researching complex systems reminded me of a paper I have cited before: Electronic Markets and Electronic Hierarchies by Thomas W. Malone, Joanne Yates, and Robert I. Benjamin. The paper states that “economies have two basic mechanisms for coordinating the flow of materials or services through adjacent steps in the value added chain: markets and hierarchies.” Markets coordinate this flow through supply and demand forces and external transactions between different individuals and firms. In a market, the cost of production is generally low because it is driven down by competition, but the cost of coordination is high because time and money must be spent gathering information about suppliers. Hierarchies coordinate the flow of materials through adjacent steps in the value-added chain by controlling and directing them at a higher level in the managerial hierarchy. A hierarchy in an economy could be either one single firm, or a juxtaposition of firms with intergrated supply chains. In a hierarchy, the cost of production is generally higher because competition is not does not permit one level of the value-added chain to compete with another entity for the next level of the value-added chain. However, hierarchies have low coordination costs because that next level of the value-added chain does not have to spend time nor money negotiating or doing market research selecting suppliers.

The thesis of the paper is this: information technology decreases coordination costs more than it decreases production costs, so as information technology continues to improve and saturate society, business arrangements will start to favor market structures over hierarchical structures. This is, if you are familiar with my blog, the central thesis of proprietism.

Intuition would imply that so far in the history of society, economies have evolved into either a market or a hierarchy based on which one whichever one was was more efficient. I propose that this is often the case, but also that the relative power and influence of the individuals proposing either a market or a hierarchy also determines which one got chosen. I speculate that when information is held hostage, suppliers are more powerful, a hierarchy will form and a market will fail to emerge, but when information is omnipresent, consumers are more powerful and a market will emerge. If neither are more powerful than the other nothing will emerge.

This is where I can’t help but to draw a parallel to complexity theory. When nothing emerges, we have chaos. I thus think of a society in which there is no one single entity with significantly more power than the rest of society, and everyone is competing for limited resources. There is information, but it is neither communicated nor accumulated. When hierarchies emerge, order is established, but inefficiencies and waste still exist because information is held hostage. But right there, at the edge of chaos, where information is free (when I say “free,” I am referring to both gratis-free and liberum-free), a complex market emerges and the system transcends.

As information technology continues to make information free all over the world, the world will continue to break up hierarchies into markets. A worldview can thus emerge. It is one inspired by complexity theory which identifies the market as the antithesis of authoritarianism.